We first unveiled our favorite liquidity indicator in 2014. This indicator correctly foreshadowed the 1987, 2000 and 2007 market top and – aside from a timely caution signal in 2015 – persistently pointed towards continued bull market gains.

For readers of our free website, we’ve dubbed this indicator ‘secret sauce.’ Why, and how this indicator is used is explained here.

In short, major market tops have been preceded by bearish divergences (S&P 500 rallies to new all-time highs, secret sauce does not).

Throughout 2016 and 2017 however, there’ve only been bullish divergences (secret sauce rallies to new all-time highs, but the S&P 500 lags behind). The last four times this happened was on April 30, and April 9, 2017, September 22, and April 16, 2016 (see green arrows).

Each time the Profit Radar Report stated that: “[Secret sauce] is already at new highs. The S&P 500 will soon follow.”

Secret sauce just confirmed the latest S&P 500 high, which means a major market top is still many months away (this doesn’t mean we can’t see a correction though).

Technical Analysis

The most exotic ‘tool in the technical analysis box’ has also been the most accurate: Elliott Wave Theory. Therefore we will focus on Elliott Wave Theory for this update.

The charts below were initially published in the August 28, 2016, Profit Radar Report, and have been our roadmap ever since as the S&P moves toward 2,500.

We have made some minor adjustments recently, which place the S&P near the beginning of a more pronounced, choppy correction (see ‘we are here’ on top graph). This correction would be labeled as wave 4 (likely intermediate degree).

Despite rising prices, there has been a measure of internal weakness (see chart below). There have been no strong up days (90% days, where 90% or more of volume flows into advancing stocks). The percentage of stocks above their 50-day SMA is also lagging.

This is compatible with a rally that’s nearing a (temporary) point of exhaustion.

Investor Sentiment

The chart below provides a long-term comparison between investor sentiment near the 2007 high and today.

In short, investors are not as euphoric about stocks today as they were in late 2007. Based on investor sentiment, stocks are not at a major market top.

In fact, stocks may still benefit from the pessimistic extremes seen in January/February 2016 (when the S&P traded below 1,900).

The January 29, 2016 Profit Radar Report stated that: “Sentiment turned pessimistic enough to become a bullish tailwind for the coming months.”

Seasonality & Cycles

Cycles project weakness later on in 2017 and seasonality is hitting a soft spot until September/October.

Conclusion

Once the S&P 500 reaches our up side target we will be looking for a more pronounced correction, but not the end of this bull market.

Continuous updates and actual buy sell recommendations (we haven’t had a losing trade since June 2015) are provided via the Profit Radar Report.

Simon Maierhofer is the founder of iSPYETF and the publisher of the Profit Radar Report. Barron’s rated iSPYETF as a “trader with a good track record” (click here for Barron’s profile of the Profit Radar Report). The Profit Radar Report presents complex market analysis (S&P 500, Dow Jones, gold, silver, euro and bonds) in an easy format. Technical analysis, sentiment indicators, seasonal patterns and common sense are all wrapped up into two or more easy-to-read weekly updates. All Profit Radar Report recommendations resulted in a 59.51% net gain in 2013, 17.59% in 2014, and 24.52% in 2015.

Follow Simon on Twitter @ iSPYETF or sign up for the FREE iSPYETF Newsletter to get actionable ETF trade ideas delivered for free.

Publishing any type of actionable market forecast always provides easy ammunition for criticism. Nevertheless, what use is there for all kinds of indicators if they aren’t used to formulate a forecast? Here’s an update to the normally exclusive 2014 S&P 500 forecast.

On January 15, I published my full and complete 2014 S&P 500 forecast for subscribers of the Profit Radar Report.

It is impossible to get a full-year forecast correct, so publishing a detailed forecast with an actual projection of the ideal S&P 500path really provides easy ammunition for ‘you were so wrong’ criticism.

But, if you can’t take criticism as a market forecaster, you are in the wrong business.

Since I follow so many indicators (technical analysis, chart patterns, Elliott Wave Theory, support/resistance levels, investor sentiment, money flows, seasonalities, cycles, etc.) it would be a cowardly waste of research not to ‘puzzle’ them together for a full-year big picture forecast.

Obviously, it wouldn’t be fair to paying subscribers to publish the entire forecast for free, but below is an interesting tidbit of the 2014 forecast.

The S&P 500 chart shows important support (green) and resistance levels (red).

The key resistance level for the first quarter of 2014 was S&P 1,855.

The January 5 Profit Radar Report stated: “Sentiment and midterm election year seasonality suggest stocks are ripe for a multi-week correction, but technicals have yet to turn bearish. Elliott Wave Theory would easily allow for another small down – up sequence and larger scale high, later on in January. Fibonacci projection resistance going back to 2002 is at S&P 1,855.”

The S&P 500 topped at 1,851 on January 15 and fell below 1,740, exactly as outlined by the yellow projection, published in the 2014 forecast. Thereafter the S&P 500 rallied to new all-time highs, also as outlined by the yellow projection.

For the past week again the S&P 500 has struggled to overcome 1,855 and now has to prove it can stay above. This particular Fibonacci resistance is a Fibonacci projection level that goes all the way back to the 2002 lows.

As you can see, the form (and corresponding price levels) of the V-shaped correction/recovery pattern has been spot on, but the timing was off.

I didn’t expect the low until around mid-March.

The eventual high could mark a major top. Why? Two monster long-term stock market cycles actually cross paths this year and suggest a strong double-whammy market top (all details and charts discussed in the 2014 forecast).

Once we get to new all-time highs, we’ll have to see if any such high sports the tell-tale signs of a major top (I’ll be looking at certain bearish divergences that have helped identify similar tops in the past).

What about the short-term?

Up until last week the S&P and Dow Jones adhered to my short-term outlook, which proposed a strong rally from S&P 1,740 to 1,830, quite well.

However, the new all-time highs required an adjustment. The original short-term projection along with the adjusted short-term outlook for the S&P 500 (NYSEArca: SPY) and Dow Jones is available here, for free.

Simon Maierhofer is the publisher of the Profit Radar Report. The Profit Radar Report presents complex market analysis (S&P 500, Dow Jones, gold, silver, euro and bonds) in an easy format. Technical analysis, sentiment indicators, seasonal patterns and common sense are all wrapped up into two or more easy-to-read weekly updates. All Profit Radar Report recommendations resulted in a 59.51% net gain in 2013.

Follow Simon on Twitter @ iSPYETF or sign up for the FREE iSPYETF Newsletter to get actionable ETF trade ideas delivered for free.